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How much does a for-profit legal service contracts bond cost in Texas?
The Texas Department of Licensing and Regulation requires legal service contract companies to post surety bonds in varying amounts. Companies that generate $300,000 or less in annual gross revenue from legal service contract sales must post $50,000 bonds. Companies that generate between $300,001 and $750,000 in annual gross revenue must post $75,000 bonds. Companies that generate more than $750,000 in annual gross revenue must post $100,000 bonds.
These bonds are subject to underwriting, which means the cost is based on a review of the applicant’s qualifications.
Why do I need this bond?
For-profit legal service contract bonds in Texas ensure that principals (legal service contract companies) perform all duties and obligations as stated in their contracts and remain in compliance with Chapter 953 of the Texas Occupations Code and all other regulations authorized by the Texas Department of Licensing and Regulation. Violations against this specific bond include selling, offering to sell, or issuing any legal service contract without giving the legal service contract holder a receipt and a copy of the contract. Other violations include not filing legal service contracts with the executive director before the contract is sold or issued.
The bond protects harmed parties from financial loss that occurs as a result of the principal’s unlawful and unethical business practices up to the full amount of the bond.
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What’s the fine print?
Texas for-profit legal service contracts bonds remain in full force and effect until canceled by the surety. The surety can cancel the bond by giving written notice of cancellation to the department at least 60 days prior to the effective cancellation date.
How to start a Texas for-profit legal service contract company
A company is defined as the person who is contractually obligated to the legal service contract purchaser under terms of the contract and who enters into a contract with a contracting attorney to provide or obtain legal services for a contract holder.
Before your company can legally conduct business as a legal service contract company in Texas, you must be registered with the Department of Licensing and Regulation. Registrations remain valid for one year from the issuance date and must be renewed annually.
Applicants must submit the following materials to register:
- a completed application form
- the name and TDLR registration number of the administrator being used by the company, if applicable
- a copy of the legal service contracts that will be marketed, sold, offered for sale, administered, or issued in this state and any endorsements or attachments to the legal service contracts
- an audit report and the audited financial statements for the company’s most recent fiscal year
- a certified statement, made by an actuary, describing the company’s reserves, if any
- proof of financial security
- the initial registration fee